Even as more and more of its customers make purchases online, Nordstrom still sees value in having brick-and-mortar locations.
That was the message from Nordstrom executives at the company’s annual shareholders meeting in Seattle on Thursday.
It’s been a tough past few months for Nordstrom, which saw its stock drop more than 17 percent last week after reporting its quarterly earnings. Lower-than-expected sales for Nordstrom point to a larger trend of retailers seeing slower brick-and-mortar mall traffic and competition from other e-commerce companies like Amazon.
About 20 percent of Nordstrom’s business today comes from purchases made online. Asked about the proportion of online sales versus offline over the next decade, Erik Nordstrom, the company’s co-president, said that he wouldn’t be surprised if that number reached 30 percent by 2026.
But despite this trend, he also noted the importance of Nordstrom’s physical locations. He said 60 percent of online returns actually happen inside Nordstrom stores, even though the company lets customers return products back to warehouses with free shipping.
“They’d rather just walk in a store and hand us this stuff, than box it up and wait for UPS to pick it up,” Nordstrom said. “We can do that because we have stores. It’s good for the customer and it happens to be good for us — we like to have customers in our stores and they tend to buy something.”
Added Nordstrom: “We’ve talked about this a lot in our board meetings the past two days: There is not a store customer and an e-commerce customer. There are just customers, and they shop increasingly as they want. There are online elements to it, and there are offline elements to it.”
Speaking of Amazon, which continues to increase its grip on the online apparel market, having a presence both online and offline is something the tech giant is exploring. Amazon opened its first physical retail location this past November, a bookstore in Seattle’s University Village, and CEO Jeff Bezos told shareholders this week that the company is “definitely” opening additional stores.
It is fascinating to watch e-commerce companies like Amazon see potential value in opening brick-and-mortar stores, while traditional physical retailers like Nordstrom are trying to keep up with their online strategies.
Nordstrom had been investing heavily in technology in recent years, spending $300 million annually in an effort to compete more effectively with Amazon and others. However, those investments haven’t been paying off as much as the company hoped.
Nordstrom CFO Mike Koppel told analysts earlier this year that the retailer would focus its tech initiatives on “fewer, more meaningful projects” while “accelerating our efforts to re-platform our architecture to streamline development while reducing costs.”
Nordstrom followed those statements by cutting approximately 120 jobs from its technology team in March, and subsequently announced plans to cut as many as 400 additional jobs across the company. Earlier this month, GeekWire reported that three top leaders within Nordstrom’s technology department had left the company.
In April, Nordstrom said the “new operating model” in its tech group was “focused on strengthening its ability to deliver on e-commerce and digital initiatives, and proactively addressing opportunities to improve supply chain and marketing effectiveness.”
At Thursday’s shareholders meeting, Erik Nordstrom did mention Amazon, noting how Nordstrom needs to “be at that standard” when it comes to e-commerce functionality like easy navigation, selection, and fast page loading times.
But it’s clear that Nordstrom still wants to utilize its physical stores even as it invests in e-commerce. The company today noted curbside pickups as one way that customers can use both online and offline offerings.
“How the customer is shopping is changing rapidly,” Erik Nordstrom said at today’s shareholders meeting. “… There are many things we can do by leveraging these physical assets we have with stores as well as e-commerce assets.”
